How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments

The Chinese gov­ern­ment and its state-owned banks have lent record amounts to gov­ern­ments in low- and mid­dle-income coun­tries since the ear­ly 2000s, mak­ing China the world’s largest offi­cial creditor.

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China is the world’s largest offi­cial cred­i­tor, but we lack basic facts about the terms and con­di­tions of its lend­ing. Very few con­tracts between Chinese lenders and their gov­ern­ment bor­row­ers have ever been pub­lished or stud­ied. This paper is the first sys­tem­at­ic analy­sis of the legal terms of China’s for­eign lend­ing. We col­lect and ana­lyze 100 con­tracts between Chinese state-owned enti­ties and gov­ern­ment bor­row­ers in 24 devel­op­ing coun­tries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and com­pare them with those of oth­er bilat­er­al, mul­ti­lat­er­al, and com­mer­cial cred­i­tors. Three main insights emerge. First, the Chinese con­tracts con­tain unusu­al con­fi­den­tial­i­ty claus­es that bar bor­row­ers from reveal­ing the terms or even the exis­tence of the debt. Second, Chinese lenders seek advan­tage over oth­er cred­i­tors, using col­lat­er­al arrange­ments such as lender-con­trolled rev­enue accounts and promis­es to keep the debt out of col­lec­tive restruc­tur­ing (“no Paris Club” claus­es). Third, can­cel­la­tion, accel­er­a­tion, and sta­bi­liza­tion claus­es in Chinese con­tracts poten­tial­ly allow the lenders to influ­ence debtors’ domes­tic and for­eign poli­cies. Even if these terms were unen­force­able in court, the mix of con­fi­den­tial­i­ty, senior­i­ty, and pol­i­cy influ­ence could lim­it the sov­er­eign debtor’s cri­sis man­age­ment options and com­pli­cate debt rene­go­ti­a­tion. Overall, the con­tracts use cre­ative design to man­age cred­it risks and over­come enforce­ment hur­dles, pre­sent­ing China as a mus­cu­lar and com­mer­cial­ly-savvy lender to the devel­op­ing world.


Anna Gelpern, Sebastian Horn, Scott Morris, Brad Parks, Christoph Trebesch


Gelpern, A., Horn, S., Morris, S., Parks, B., & Trebesch, C. (2021). How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments. Peterson Institute for International Economics, Kiel Institute for the World Economy, Center for Global Development, and AidData at William & Mary.

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